This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice (http://www2.deloitte.com/ca/en/legal/cookies.html) for more information on the cookies we use and how to delete or block them.

The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

April 2019

On April 1, 2019, the Ac­count­ing Stan­dards Board (AcSB) pub­lished its Annual Plan for 2019-2020. This Annual Plan sets out the Board’s key activities in 2019-2020, in order to help it achieve the objectives in its five-year Strategic Plan for 2016-2021.

The AcSB is in the fourth year of its current Strategic Plan.

With respect to the longer term, in order to move forward with its research program, the AcSB will:

continue to provide research support to the IASB as it furthers its work on projects important to Canadian stakeholders, such as the Extractive Activities Project and Rate Regulated Activities.

continue to seek opportunities to better understand user needs and the financial reporting environment for private enterprises and not-for-profit organizations.

undertake research to consider whether an update to the Preface to the CPA Canada Handbook – Accounting is required.

conduct research to understand what type of entities currently use Part II – Accounting Standards for Private Enterprises of the Handbook.

gain an understanding of the nature and extent of issues arising on the application of Part IV – Accounting Standards for Pension Plans of the Handbook.

be considering options for the removal of Part V – Pre-changeover Accounting Standards from the Handbook.

On April 26, 2019, the Accounting Standards Board (AcSB) released its response to the International Accounting Standards Board’s (IASB) Exposure Draft, Onerous Contracts – Cost of Fulfilling a Contract (Proposed amendments to IAS 37).

This exposure draft seeks to specify the costs an entity should include in determining the “cost of fulfilling” a contract for the purpose of assessing whether a contract is onerous.

The AcSB supports the modified retrospective approach, but disagrees with the IASB’s decision not to allow the option to apply full retrospective application in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. They recommend allowing the use of full retrospective application for entities as long as those entities have the information available to do so without the use of hindsight.

On April 3, 2019, the Board of Trustees of the Financial Accounting Foundation (FAF) has announced that it is searching for new FASB (and GASB) chairmen

The current FASB Chairman Russell Golden (and current GASB Chairman David Vaudt) will conclude their terms on June 30, 2020. The FAF Board of Trustees has announced on April 3, 2019 that it is looking for candidates with “varied backgrounds and experience from diverse talent pools.”

On May 2, 2019, at a financial reporting conference at Baruch College in New York City, Financial Accounting Standards Board (FASB) Chairman Russell Golden discussed the challenges of "bilateral convergence" between IFRS and US GAAP, what the Boards have accomplished together, and how the Boards will work together in the future.

Mr. Golden began his speech by acknowledging that comparable global accounting standards help reduce complexity and costs in financial reporting. He stated, however, that “by 2013, [the FASB had] come to realize that the ideal of single set high-quality global accounting standards was just that—an ideal. Different starting points, different cultures, and different legal systems made bilateral convergence impossible to achieve.”

After he highlighted the success of the joint FASB-IASB projects on business combinations, non-controlling interests, fair value measurements, borrowing costs, segment reporting, stock compensation, and non-monetary exchanges, Mr. Golden reflected on the diverging strategies for the Boards’ projects on revenue recognition, leases, credit losses, and insurance. He closely examined the reasons for divergence, which were usually due to cost and complexity for US stakeholders.

Mr. Golden discussed how the FASB is working to “[forge] a new model for how we support the goal of more comparable, high-quality accounting standards worldwide,” which includes:

Development of high-quality GAAP — Mr. Golden noted that considering opportunities to align with IFRS when possible is "embedded" in the FASB’s process. He said the FASB is in "constant contact" with the IASB about the IASB’s projects and that the Boards share research activities to “continue progress toward improved, aligned solutions.”

Active participation in the Accounting Standards Advisory Forum (ASAF) — Mr. Golden described the FASB’s commitment to the ASAF, which advises the IASB as it develops IFRS. He called the FASB’s involvement “an important opportunity to represent U.S. interests in the IASB’s standard-setting process” and noted that the ASAF provides a “valuable opportunity to work together with other standard setters on issues of common interest.”

Enhancing relationships with other national standard setters — Mr. Golden mentioned that the FASB meets individually with standard setters from many countries to “exchange ideas on improving our respective standards. This process also helped promote the broader flow of information and ideas that mutually inform our thinking. And to contribute to an environment that will foster greater alignment of standards across the globe.”

He made clear in his speech that the FASB will continue to work closely with the IASB to improve accounting standards worldwide. He also briefly provided his own opinion on sustainability reporting:

I think we should follow the IASB’s lead and remain focused on improving the financial statement. And leave sustainability reporting and other performance metrics—however important they may be—to other experts.

On April 2, 2019, at the Climate-Related Financial Reporting Conference in Cambridge, England, IASB chair Hans Hoogervorst gave a speech entitled ‘What sustainability reporting can and cannot achieve’.

Mr. Hoogervorst admitted that he had been skeptical about climate change in the past, but changed his mind over the years. During his speech, he criticized public policies that have enabled climate change; he called climate change “a massive example of such market failure.” He highlighted (1) the importance of sustainability reporting, (2) how it relates to financial reporting, and (3) the role of the IASB.

Mr. Hoogervorst was clear: “I do not think the IASB is equipped to enter the field of sustainability reporting directly. Setting sustainability reporting standards requires expertise that we simply do not have. Moreover, there are already more than enough standard-setters active in this field.”

He went on to discuss how sustainability issues will become more visible in financial statements as the effects of climate change become more prominent. He noted, “[M]any sustainability issues may only emerge in the long run. In such cases they will tend to escape the financial statements, which are essentially backward-looking.”

He then explained how the IASB is working to improve ‘broader financial reporting’. Mr. Hoogervorst discussed the IASB’s management commentary project — a renewal of its 2010 Management Commentary Practice Statement. He mentioned that the updated Practice Statement will focus more on intangibles and require companies to report on sustainability issues — including climate change — if those issues impact their businesses in a material way.

Mr. Hoogervorst closed his speech by reflecting on the plethora of sustainability standards and initiatives. He praised the Corporate Reporting Dialogue, which is working to align the frameworks of various standards. He also cautioned against expecting too much from sustainability reporting as an agent for change: “[W]e should not expect sustainability reporting to be very effective in inducing companies to prioritize planet over profit.”

He explained that financial incentives are crucial in combatting climate change and stated:

I strongly believe that the most promising strand of sustainability reporting comprises those standards that focus on the investor and on the impact of sustainability issues on the future returns of the company. This is the type of sustainability reporting which will fit well with our Management Commentary Practice Statement, rather than the reporting that focuses primarily on a company’s contribution to the public good.

For more information, see the transcript of the speech on the IASB’s website.

On April 9, 2019, at its meeting held in London, the International Accounting Standards Board (the Board) discussed as a whole the amendments to IFRS 17 that the Board tentatively decided to propose and confirmed that it wishes to proceed with an exposure draft to amend IFRS 17.

The Board discussed the following topics and questions:

Sweep issues. The Board discussed additional stakeholder concerns relating to IFRS 17 (and IFRS 9) that have arisen in the project on the amendments to IFRS 17. On the effective date of the proposed amendments to IFRS 17, the staff recommended that the effective date is aligned with that of IFRS 17. On all other issues, the staff recommended that the Board not undertake any further action. The Board agreed unanimously with the staff recommendations.

Annual improvements.

The Board discussed a number of minor changes the staff have become aware of through the ongoing implementation activities on IFRS 17 that would fall within the scope of the annual improvements process. There were some questions by the Board and additional clarifications will be added to the wording proposed by the staff. The Board agreed unanimously to include these changes in the forthcoming exposure draft.

The Board also agreed to include the minor changes to IFRS 17 identified as candidates for the annual improvements process in June 2018 in the forthcoming exposure draft.

Overview of the amendments to IFRS 17. The Board was provided with an overview of all the amendments to IFRS 17 that the Board has tentatively decided to propose, the likely effects of the proposed amendments to IFRS 17, and a cost-benefit analysis for all amendments. This part of the session was educational in nature, and no vote was taken.

Due process steps and permission for balloting.

The Board was asked to confirm its tentative decisions from the November 2018 meeting relating to the mandatory effective date of IFRS 17 and the fixed expiry date for the temporary exemption in IFRS 4 from applying IFRS 9. The Board confirmed that it wants to propose deferring the effective dates (unanimous vote).

The Board was asked to confirm that it wishes to proceed with an exposure draft to amend IFRS 17. The Board confirmed that it is satisfied that it has complied with the applicable due process steps and that it should begin the balloting process for the exposure draft (unanimous vote).

No Board member indicated a planned dissent at this stage.

The staff will now begin drafting the exposure draft, which it expects to issue by the end of June 2019. The comment period will be discussed at the May 2019 Board Meeting after obtaining permission from the Due Process Oversights Committee for a reduced comment period.

On April 10, 2019, the International Accounting Standards Board (the Board) issued the eighteenth edition of its newsletter "Investor Update", which provides investors with quick access to information about current accounting and financial reporting topics.

On April 12, 2019, the International Accounting Standards Board (IASB) released a podcast reporting on the discussions at two recent meetings on IFRS 17, "Insurance Contracts".

The podcast discusses the meeting of the Transition Resource Group (TRG) for Insurance Contracts on April 4, 2019 and the IASB discussion of possible amendments to IFRS 17 on April 9, 2019. The IASB's discussion considered some of the TRG findings.

On May 3, 2019, the International Accounting Standards Board (the Board) published an exposure draft "Interest Rate Benchmark Reform (Proposed amendments to IFRS 9 and IAS 39)" that constitutes a first reaction to the potential effects the IBOR reform could have on financial reporting. Comments are requested by June 17, 2019.

Background

Interbank offered rates (IBORs) are interest reference rates, such as LIBOR, EURIBOR and TIBOR, that represent the cost of obtaining unsecured funding, in a particular combination of currency and maturity and in a particular interbank term lending market.

Recent market developments have brought into question the long-term viability of those benchmarks. The Board is monitoring further developments in this regard in order to determine whether there are any implications for the existing accounting requirements. The focus of the project is currently on financial instruments although an IBOR reform would later definitely also have impact on any standard dealing with discounting.

The amendments proposed today deal with issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark with an alternative interest rate and consider the implications for specific hedge accounting requirements in IFRS 9, Financial Instruments and IAS 39, Financial Instruments: Recognition and Measurement, which require forward-looking analysis.

Suggested changes

modify specific hedge accounting requirements so that entities would apply those hedge accounting requirements assuming that the interest rate benchmark on which the hedged cash flows and cash flows from the hedging instrument are based will not be altered as a result of interest rate benchmark reform;

require specific disclosures about the extent to which the entities' hedging relationships are affected by the proposed amendments; and

note that the amendments would be mandatory.

The proposed amendments also note that the Boards proposes to amend the hedge accounting requirements only as specified in the exposure draft and that the proposals are not intended to provide relief from any other consequences arising from interest rate benchmark reform. Moreover, the exposure draft notes that if a hedging relationship no longer meets the requirements for hedge accounting for reasons other than those specified in the exposure draft, then discontinuation of hedge accounting is still required.

Comments on the proposed changes are requested by June 17, 2019.

Effective date

The exposure draft proposes that the amendments would be effective for annual periods beginning on or after January 1, 2020 and would be applied retrospectively. Early application would be permitted.